If you’re reading this right after April 15th, you may still be shellshocked. Most entrepreneurs tell me it’s the most stressful time of year. Most I talk to shudder at the thought of anything business tax.
But tax season doesn’t have to be stressful. With a few simple steps, you can set up your business so that tax time is a breeze. Not convinced? It took me a grand total of 15 minutes this year to do the taxes for my business. 15 MINUTES.
So what’s the secret? It’s pretty simple (thankfully). Follow these 4 steps to take tax time from mind-numbing and overwhelming to easy and satisfying.
Make quarterly business tax payments.
Most businesses need to pay quarterly estimated tax payments to the IRS. This includes individuals/sole proprietorships (freelancers, this includes you!).
So who pays? Anyone who receives income on which taxes are not withheld and paid to the IRS owes quarterly payments. This includes everything from coaching income to digital course sales to affiliate fees. Basically, this is all of your non-employee income.
However, there is an exception. If you’re a U.S. resident or citizen and had zero tax liability in your business last year (as long as your business was in existence for the entire calendar year), then you may not have to make quarterly estimated tax payments this year.
If you do have to pay, set up a system for making these payments when they’re due. This way you don’t incur any penalties and don’t have to cut a huge check on April 15th. Quarterly tax payments are due 4 times each year – April 15, June 15, September 15 and January 15.
The IRS provides guidance on how, when and where to make quarterly estimated tax payments. If you need more help, I highly recommend Track.tax. Track will track your income, determine your payment amount, and make your payments so that you don’t miss a deadline.
Get a good accounting system.
If you’ve been a part of my community for a while, you’ve heard me say this before. If you’re new here, get used to this – I’m going to keep screaming this from the rooftops.
A good accounting system helps you stay on top of the money in your business. Without one, it’s hard to make smart strategic decisions and build a successful business.
But a good accounting system is also important to track your numbers for tax time. A system that tracks everything and gives you easily readable reports will make doing your taxes a piece of cake.
As I said above, it took me 15 minutes to do my business taxes this year. That’s because I had a good accounting system. I was able to easily pull a report with my numbers that could easily be inputted into my tax forms.
Not sure where to start? Wave Apps is free and simple to set up.
Save your receipts.
Deductions are the most important number on your return because they reduce your overall tax liability.
Keep good records to maximize your deductions and substantiate them if you’re ever audited. This includes receipts of all of your expenses.
Keep it simple and find a system that makes it easy for you to do this on a regular basis. Wave Apps has an app that will take a picture of your receipts and upload it to your account. You can also send email receipts directly to your Wave account.
Don’t leave your business tax filings to the last minute.
Most of my business in April is helping entrepreneurs do their taxes. They don’t know what form to use or what deductions they can take. Our conversations usually happen in a panicked state because they’ve left filing their taxes to the last minute.
If you don’t procrastinate, filing business taxes doesn’t have to be complicated. When you’re stressed to get them done, you’re more likely to use the wrong numbers or miss an important deduction. Without good systems in place, you’ll want more time to sort through that shoebox you call an accounting system.
The IRS usually releases the updated tax forms in late January, so you can start as early as then. To the extent you have questions, call in January or February, because the phone lines get overwhelmed in April. And if you’re working with a CPA, you’ll want to send them your information as early as possible. They’ve got plenty of last-minute clients and you don’t want to be one of them.
Taxes are FUN! OK, maybe that was a bit of a stretch. But they don’t have to be stressful. Implement these simple steps early on to make tax season and your April 15th stress-free.